Cigarette Tax Looks Likely, Lawmakers Say

Posted: Sun 9:27 PM, Mar 02, 2008&nbsp|&nbsp

Updated: Mon 9:59 AM, Mar 03, 2008

FRANKFORT, Ky. (AP) - House lawmakers are likely including a boost in Kentucky's cigarette tax as part of a plan to raise nearly $800 million over two years to help the state's droopy finances, Speaker Jody Richards said.

Richards, who met behind closed doors with other House lawmakers at the Capitol Sunday, said he intends to seek support from Gov. Steve Beshear for raising the state's tax on cigarettes. The move would help steer state government away from making drastic funding cuts to education and public services, Richards, D-Bowling Green, said.

"I'm struck by the difficulty that we're having putting this budget together," Richards said during a break in the private budget meeting. "It's just real tough, it's way underfunded. We must have more revenue."

Beshear has proposed an $18.5 billion two-year spending plan that includes 12 percent cuts to public universities and numerous state agencies. Soaring expenses in areas such as Medicaid - which provides health insurance coverage for more than 722,000 low-income and disabled Kentuckians - were behind proposed cuts to other government expenses, Beshear said.

Economic forecasters have predicted sagging revenues for Kentucky state government, to the sum of nearly $900 million over the next two years.

Beshear, who took office in December, has said he's reluctant to raise any taxes and views them as a last resort option. Instead, Beshear has supported a plan to amend Kentucky's constitution to legalize casino gambling. Casinos could generate $600 million per year in new revenue, Beshear has said.

But, the governor's proposal has been a tough sell in the legislature, and Beshear said last week he was working with Democratic House leaders to build support for the idea. Richards and Beshear said last week they did not have the 60 out of 100 votes in the House needed to push it on to the Senate, where it has an uncertain future.

Beshear spokeswoman Vicki Glass said Sunday the governor, "has not seen the committee's revenue package, but as this process continues, he looks forward to working with the House to move the budget along."

At the Capitol Annex, the building across from the Capitol that houses state lawmakers' offices and meeting rooms, House lawmakers met on the budget throughout the day. Members of six budget subcommittees sifted through the proposed budget.

House Appropriations and Revenue Committee chairman Harry Moberly, D-Richmond, said lawmakers were looking to find new money to fund pay raises for public school teachers and offset the funding cuts Beshear proposed for state universities.

"The budget at this point is unacceptable and it would definitely cause the state to lose ground," Moberly said.

Richards and Moberly said they were planning to bring a revenue proposal to other House Democrats later in the week that would generate $400 million in new revenue in each of the next two fiscal years. They declined to elaborate on specific details.

Moberly said the plan did not consider any possible revenue from casinos.

"If it looked like the gambling amendment was going to pass the House, we could do a surplus spending plan," Moberly said.

Richards said he would ask Beshear for his support on raising the cigarette tax to make it an easier sell both in the Democrat-led House and in the Republican-controlled Senate.

A proposal before the House by Rep. David Watkins, D-Henderson, would raise the cigarette tax - currently 30 cents per pack - up to $1 per pack. That would raise about $205 million in additional tax revenue, the Legislative Research Commission has estimated. Kentucky's current tax is among the lowest in the nation.

Richards said he thought the House could pass "a reasonable increase" that would fall below 70 cents a pack.

"I'm going to do everything I can to encourage him (Beshear) to support this in an overt way so we can pass this not only in the House but in the Senate," Richards said. "Folks, these are needed. It's not that we're just out here going through some sort of exercise." --- The legislation is House Bill 406.

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